Written by John Swire
The 12-month anniversary of the 25.25ppl Müller Direct (not aligned to a retailer) standard litre liquid base price is not one to be celebrated. The Müller Milk Group Board states that non-aligned suppliers for the UK’s number one liquid milk dairy company are currently receiving a base price 5.92ppl lower than 31.17ppl which is the average of the two main retailer cost tracker milk prices for September 2020. In addition, a Müller Direct premium of 1ppl will be paid to suppliers on eligible volume in January 2021.
Ray Gibbins, Vice-Chairman of the MMG Board commented; “At this milk price, many Müller Direct farmers are having difficulty covering their monthly costs with many relying on the recent Government bounce back loans to support their cash flow needs. There are fears that dairy farms will increasingly exit production unless the liquid market returns a more sustainable milk price”.
The current method which sets the milk price paid to Müller Direct (non-aligned) suppliers is fundamentally flawed. The monthly milk price is determined by the processor in the form of discretionary pricing. This approach creates an imbalance in the relationship between farmers and processors.
The issue of discretionary pricing is one that the Government is currently seeking views upon. The MMG Board is positively engaging with the current consultation on contractual relationships in the UK dairy industry. Included in its response MMG will be strongly advocating a review of discretionary pricing and consideration of alternative pricing options, a mechanism to support volume management and the possible adoption of non-exclusivity arrangements. It is hoped that the outcome of the consultation will result in risk and reward being balanced more equitably across the dairy supply chain. By responding to the consultation, dairy farmers have a direct route into Government and a long-awaited opportunity to make positive changes for the benefit of dairy farmers and the future of their farm businesses.
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